Regulatory Roundup #23

Summary 

Within two days of the U.S. Senate failing to get the necessary 60 votes for an open debate of the CLARITY Act, the SEC granted a five-year regulatory exemption for on-chain trading of tokens representing equity interest, while CFTC staff extended introducing broker no-action relief to passive software providers that meet its conditions. On the other side of the pond, the EBA and ESCB have requested that the European Commission reopen the reserve requirements for stablecoins as part of the Markets in Crypto Assets Regulation (MiCA) and the ECB is preparing to dip its toe in, with plans to invest a small portion of its own funds in tokenized securities. The Japanese Financial Services Agency (FSA) has put DEXs, DeFi and wallet providers on its study agenda.

🔦 Spotlight

🇺🇸 US Regulators create a time-limited framework for digital assets

CLARITY failure

On 15 September, the Senate voted 49-50 on cloture on the motion to proceed to H.R. 3633, the CLARITY Act (Roll Call Vote 234). Sixty votes were needed. The vote was not on the bill itself but on whether to start debating it, and it failed despite a final substitute that its sponsors said contained 126 substantive changes requested by Democrats, including substantially all of the Tillis-Gallego ethics proposal and a role for state attorneys general in enforcement. Every Democrat present voted no. So did four Republicans: Collins, Hawley, Moran and Tillis. According to multiple reports, Tillis switched his vote at the close of the roll call so that he could enter a motion to reconsider, which keeps the bill procedurally available for another attempt this session. Senator Lummis had told reporters before the vote that if it failed, "It's over."

The repair kit

On 17 September, the SEC issued its Innovation Exemption, an order under Section 36(a)(1) of the Exchange Act. It exempts "Tokenized Securities Venues" (TSVs) running permissioned automated market maker (AMM) pools from the definition of an exchange, and qualifying liquidity providers from the definition of a dealer. The scope is restricted. Stocks are tiered by their Limit Up-Limit Down tier. A venue, aggregated with its affiliates, may trade no more than 75 Tier 1 and 250 Tier 2 symbols, and its volume in any one stock is capped at 0.25% (Tier 1) or 2.5% (Tier 2) of that stock's prior-month average daily volume. Tokenized NMS stock may be paired only with another tokenized NMS stock, a non-security crypto asset (e.g. stablecoins, BTC, ETH) or a tokenized money market fund, and the order's own example of a non-security crypto asset is a GENIUS Act payment stablecoin. The relief runs from 17 September 2026 to 17 September 2031. SIFMA's response warns of "costly fragmentation" which, to be fair, is also a viable description of US crypto regulation as a whole.

The same day, the CFTC's Market Participants Division issued Staff Letter 26-25, extending the introducing broker no-action relief granted to Phantom in March to providers of 'passive software' that meet ten conditions. It lasts until a Commission rulemaking or guidance addresses the question. Also on 17 September, according to reports, OIRA received the CFTC's crypto market structure rulemaking (RIN 3038-AF80) at the pre-rule stage, which points to an advance notice or concept release before any proposed rule.

Add these chunky pieces of relief to what we’ve already seen from the regulators: the SEC staff statement on self-custodial wallet interfaces covered in Issue 16, which withdraws itself on 13 April 2031 absent Commission action, and the SEC's Regulation Crypto Assets proposal, with comments due 20 October. Who needs CLARITY…?

Clarity in the absence of CLARITY, at least for now

Taken together, the agencies have assembled something that looks like a regulatory framework, but in the absence of CLARITY isn’t backed by an act of Congress allocating jurisdiction between the SEC and CFTC.

What has been constructed is durable to different extents at different levels:

• staff letters and statements bind neither the Commission nor a court, and staff can withdraw them;
• exemptive orders are Commission actions, but a future Commission can modify or revoke them, and this one expires on a fixed date regardless;
• rules adopted through notice and comment are the most durable, but they remain open to challenge on statutory authority, and none of the core crypto rules has yet been adopted.

The CFTC position is the most exposed: the agency currently has a single sitting commissioner, Chairman Selig (which presumably at least keeps the meetings short), and the Commodity Exchange Act has no explicit spot registration authority for digital commodities, which is the gap CLARITY was meant to fill. From 2 October, following the upcoming departure of Hester Peirce, the SEC will also operate with two commissioners.

This shouldn’t dampen industry excitement over these regulatory developments, but it does essentially kick the can down the road and make it subject to the whims of future administrations.  The Innovation Exemption's five-year term, like the wallet interface statement's before it, spans at least one presidential election. The motion to reconsider means CLARITY can return without starting from scratch, but the open question is whether Congress comes back to it, or whether the market simply gets used to rules with expiry dates.

🌎 Global Developments 

🇺🇸 United States 

🏦 OCC approves three digital asset trust banks in a day

On 18 September, the OCC granted preliminary conditional approval to two new national trust banks, Catena Trust Bank (Corporate Decision #1392) and Agora National Trust Bank, and conditional approval for Bastion Platforms Trust Company, a New York trust company, to convert to a national trust bank (#1391).

The national trust charter is becoming the standard federal route into custody and stablecoin issuance, and a practical alternative for counterparties that would otherwise stack state licenses.

🚫 OFAC: a $24 billion-plus marketplace and an Iranian exchange

On 9 September, OFAC designated Xinbi Guarantee, a Chinese-language, Telegram-based guarantee marketplace, as a significant transnational criminal organization under E.O. 13581. Treasury says it has processed the equivalent of over $24 billion in digital assets and fiat currency since around 2022. Two technology providers, Anwen and SafeW, were designated for material support, and DOJ's Scam Center Strike Force seized infrastructure in parallel.

On 17 September, OFAC designated BitBank, an Iranian exchange Treasury describes as controlled by the previously designated financier Babak Zanjani, under E.O. 13902. Treasury says Zanjani used BitBank to move hundreds of millions of dollars' worth of Bitcoin to the IRGC between June and July.

Xinbi's SDN entry lists around 50 TRON addresses, which belong in screening tools today. BitBank's lists websites but no addresses, so screening teams should work from the current SDN entries.

🇪🇺 European Union 

🪙 The EBA and the ESCB want MiCA's stablecoin rules reopened

Two of the EU's most important voices on stablecoins used their responses to the Commission's MiCA review consultation to push for changes to reserve requirements.

The European System of Central Banks, the ECB together with the national central banks, wants the requirement to hold at least 30% of reserves (60% for significant tokens) as deposits at credit institutions removed. In its place it proposes liquidity buckets: minimum shares of reserve assets maturing within one and five working days, starting from the EBA's draft standards. It wants the interest prohibition extended beyond MiCA-regulated services to crypto lending, borrowing and staking, and to indirect remuneration such as loyalty benefits. And it states plainly that "MiCAR does not provide a legal basis for multi-issuer stablecoin schemes involving a third-country issuer."

The EBA's separate response, published on 24 September, is gentler on the overall framework, which it calls broadly appropriate, but lands in the same places. It wants the deposit minimum reviewed, flags "significant to very significant risks" from third-country multi-issuer schemes, and recommends regulating crypto lending, including where CASPs provide access to DeFi lending protocols. As of 1 September, it cites 39 EMTs issued under MiCA and no authorized ARTs. The mythical "asset-referenced token" continues to be MiCA's unicorn: frequently discussed but never seen.

With both authorities aligned on the deposit floor, that change looks likely to make it into any Commission proposal. The multi-issuer question is the one for institutional users to watch. Less noticed is the ESCB's call for significant CASPs to establish an EU intermediate parent undertaking (IPU), which is CRD-style group structuring the ECB has now raised in both the MIS package and the MiCA review.

🏛️ Pontes goes live, and the ECB plans to become a buyer

On 21 September, the Eurosystem launched Pontes, which settles wholesale transactions in tokenized assets in central bank money. It will start with a core set of services, with longer operating hours and enhanced features phased in and full implementation expected by 2028. Thirteen market participants and four DLT operators (Axiology, Cashlink, Clearstream and SWIAT) have completed onboarding, with the Bundesbank also connected as a participant.

The same day, the ECB said it has begun preparatory work to invest a small portion of its own funds in tokenized securities, initially euro area government, agency and supranational debt, with purchases settled through Pontes.

The participant list includes banks, public development lenders (EIB, KfW, CDC, NRW.BANK) and savings and cooperative institutions, with no crypto-native firms and no stablecoin issuer. Read alongside the ESCB's MiCA response above, the TLDR is that the Eurosystem is making sure a central bank money option exists alongside the private settlement assets it supervises.

🧭 ESMA pre-positions on MIS

Speaking in Warsaw on 23 September at a conference marking the Polish regulator KNF's twentieth anniversary, ESMA Chair Verena Ross named CASPs "who often serve the entire EU market" among the entities where direct ESMA supervision would help, while calling for "realistic significance criteria" that do not produce "a supervisory model more complex than the one it seeks to replace." A speech on who should supervise crypto firms, delivered at the anniversary of a regulator that currently cannot license any (see issue 13), is both ironic and a pointed intervention with Council negotiations reportedly moving towards ESMA supervision of significant CASPs only.

The same day, ESMA announced a new Union Strategic Supervisory Priority on digital innovation from 2027, with an initial focus on how supervised entities use AI and tokenization. It is a convergence tool rather than a new power, but it lets ESMA coordinate national supervisory work on tokenization while the MIS package is still being negotiated.

🇬🇧 United Kingdom

🚪 The FCA gateway is open but the perimeter is still moving

The FCA's authorization gateway for the new cryptoasset regime opened at 7am on 30 September and, under the FCA's direction, closes on 28 February 2027. Firms already providing services that apply inside the window can continue those services under a saving provision until their application is determined. It does, however, not let new entrants start operating. Late applicants fall into a transitional provision that permits only servicing pre-existing contracts.

On 16 September, the FCA published PS26/18, finalizing the perimeter guidance consulted on in CP26/13 as a new PERG 18. The changes from the original consultation included added guidance on the "by way of business" test and a fuller treatment of territorial scope. The FCA declined to create an overseas persons exclusion (OPE), noting that it cannot create exclusions through guidance.

HM Treasury has also, following fervent objection and noise from industry around perceived overreach by the FCA in the draft PERG 18, laid a draft affirmative statutory instrument adding exclusions for proprietary trading not carried on as a service to others, for non-discretionary technical interfaces that are not themselves authorized or payment service providers, and for a range of UK stablecoin, collateral and safeguarding arrangements. And on 24 September, the FCA Board set the fee costs for cryptoasset firms (Handbook Notice 144): application fees of £2,820 for arranging, dealing as agent and staking, £11,260 for dealing as principal, safeguarding and stablecoin issuance, and £28,150 for operating a trading platform, with a single fee at the highest applicable rate.

The awkward detail is in PS26/18 itself. The FCA plans to consult in early Q4 2026 on further PERG amendments to reflect the Treasury instrument, with final guidance in early 2027. Firms filing in the first months of the window are therefore applying against a perimeter the regulator has said will change, under exclusions set out in a draft SI. For proprietary traders and market makers, the permissions they may need therefore turn on text that is not yet law.

The fees are the easy part. The FCA now rejects pre-application meeting requests that are not accompanied by "meaningful supporting information," including analysis of the regulated activities sought, and may ask for the legal advice behind it. In practice, a perimeter memo has become the price of a meeting.

📈 Retail funds get crypto ETNs; promotion approvers get fewer forms

FCA Handbook Notice 144 also carried two smaller changes. From 28 September, UCITS schemes and all non-UCITS retail schemes, including those operating as funds of alternative investment funds, may hold crypto ETNs up to 10% of scheme property. The FCA extended the limit to FAIFs after feedback. Long-term asset funds remain excluded. From 1 October, firms approving cryptoasset financial promotions under s.21 will no longer need to notify the FCA of most approvals, though notification still applies to approvals given in the three months after the approver's first approval of a qualifying cryptoasset promotion, following a grant or variation of its permission, and to direct offer promotions.

🌏 Asia-Pacific

🇭🇰 Hong Kong

🧾 Policy Address sets the agenda for stablecoin settlement

The Chief Executive's 2026 Policy Address, delivered on 16 September, commits the SFC to "promote the trading of regulated stablecoins on licensed virtual-asset trading platforms and their use in the settlement of tokenised money market funds." It also commits the HKMA to test the tokenization of Exchange Fund Bills by the end of the year, and to CBDC settlement and 24/7 operations on its EnsembleTX platform around the same time.

The stablecoin line connects two pieces we covered in previous newsletters. The HKMA licensed its first two issuers, HSBC and Anchorpoint, in April. The SFC opened secondary trading of tokenized money market funds on licensed platforms, with stablecoin settlement contemplated, in the same month (see Issues 16 and 17). The Policy Address sets out a regulated local settlement asset for a regulated local tokenized product. For VATPs, that implies listing and custody policies that distinguish HKMA-licensed stablecoins from everything else.

What the Address does not mention specifically is the licensing bill for virtual asset dealers and custodians, which the government has said it will introduce into LegCo within 2026. It commits only to "enhance virtual-asset licensing regimes." With three months left in the year, firms planning around a 2026 introduction may want to plan around 2027 instead.

🇯🇵 Japan

⛓️ After FIEA, the FSA turns to DeFi and wallets

Japan's amended Financial Instruments and Exchange Act passed the Diet on 15 July and was promulgated on 23 July as Act No. 64 of 2026, with the crypto provisions due to take effect by Cabinet Order within a year. The FSA is already working on what comes next. On 25 September, it launched “On-Chain Finance Forum for the AI Era”, supported by two study groups. The first, the revived Study Group on Responding to Digital and Decentralized Finance, has a remit covering the tokenization of assets and JGBs, clarifying how stablecoins are treated across different statutes, and "DEX, DeFi and wallet providers". The forum itself will look at putting Bank of Japan current accounts on-chain.

The FSA's FY2027 tax reform requests, published at the end of August, add a practical fix. Trustees of trust-type stablecoins are currently expected to file beneficiary reports and trust statements whenever holders change, which is impossible when the trustee cannot see who holds the token. The FSA is asking for those filings to be dropped. It is an unglamorous request, but without it a freely circulating yen trust stablecoin has a paperwork problem.

🔎 Things to Watch

• 🇺🇸 CLARITY Act: Tillis motion to reconsider keeps the bill available this session. Any revival now depends on lame-duck floor time after the 3 November midterms.
• 🇺🇸 SEC Reg Crypto: comments due 20 October 2026. Adoption would fall to a two-member Commission.
• 🇺🇸 GENIUS Act: Fed proposals out for 60 days from Federal Register publication. No final rules from any agency; 18 January 2027 is the statutory backstop.
• 🇺🇸 CFTC: crypto market structure rulemaking (RIN 3038-AF80) at OIRA at the prerule stage. 
• 🇬🇧 FCA: application window runs to 28 February 2027. Further PERG consultation due early Q4 2026; Parliament still to approve HM Treasury's amending SI.
• 🇪🇺 MiCA review: Commission consultation closed 30 September. Reserve composition, multi-issuer schemes and crypto lending are the live questions for any legislative proposal.
• 🇪🇺 MIS package: Council negotiations reportedly converging on ESMA supervision of significant CASPs only, with political agreement targeted for end-2026.
• 🇸🇬 MAS: consultation on Payment Services Act amendments to give the stablecoin framework legal force closes 16 October 2026.
• 🇰🇷 South Korea Digital Asset Basic Act: government bill reportedly still not filed. Bank-majority stablecoin issuance and exchange ownership caps remain unresolved.

Coming into view:

• 🇯🇵 Japan FIEA: crypto provisions commence by Cabinet Order no later than 23 July 2027. Draft Cabinet Office ordinances awaited.
• 🇭🇰 Hong Kong: virtual asset dealer and custodian licensing bill promised for LegCo "within 2026"; HKMA tokenized Exchange Fund Bill tests and EnsembleTX 24/7 operations by year end.
• 🇺🇸 DTCC tokenization service launch scheduled for October 2026.
• 🌐 OECD CARF: 2026 is the first reporting year for early adopters, with first exchanges between tax authorities due by September 2027.

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